Leading and lagging metrics: heavily debated and overrated?

There are big debates around leading and lagging metrics. It’s usually the wrong debate.

Metrics are important. After all, we want to “measure what matters”. And you can’t manage what you don’t measure.

However, in many conversations where we’ve helped set OKRs, we’ve seen the leading vs. lagging debate cause a large amount of confusion and long lists of immovable metrics.

To get us all on the same page, here’s a view of leading and lagging metrics. I’ve used a simple sales process as an example.

From this, we can see that “proposals submitted” is a leading metric to “committed revenue” – more proposals will lead to more revenue.

Yet, “proposals submitted” is a lagging metric from “customer pitches” – to get to more proposals, we need more conversations and pitches.

So is “proposals submitted” a leading or lagging metric? Well, it’s both…

Levels of metrics

Some teams track sales or committed revenue. This is fine, but it’s the absolute minimum to ensure survival.

Some teams require a leading metric for revenue and, hence, track proposals. This is better, but far from good.

Most conversations stop there.

But how do we go a level deeper?

Do we track proposals as the leading metric? Or pitches as the leading metric for proposals? Or sales qualified leads leading to pitches?

Having this conversation is quite powerful, but it’s not enough, and that’s the problem. Before we solve the problem, let’s understand why we need metrics.

The purpose of metrics

Here are three good reasons for metrics:

1. It shows us whether we’re getting better. We want to improve and grow, and the only way to know is if we measure progress. I can only understand if I’m becoming a better runner if I measure my 5km time on a regular basis.
2. It leads us to take action. If it doesn’t, it’s creating overheads for a finance team that needs to track it and for some business team that needs to sit in a meeting and look at it.
3. It creates regular engagement. The metrics need to be considered and reviewed on a regular basis, which might lead to discussions within a team around how to move those metrics, leading back to point 2, around taking action. How frequent “regular” is will depend on the metric, the intention, and the team.

Some metrics are more equal than others

We worked with an NGO recently that has a metric looking something like this: “Increase funding by $50m in the next three years”, which made me think through this example.

This metric could be given to in-country teams, and they are held to account for it.

That, unfortunately, is not a very useful exercise. Here’s why:

1. The in-country teams can’t realistically influence this metric. This might be because they don’t have the right network or they don’t understand the funding requirements.
2. It’s a long-term (three-year) metric with no short-term (e.g. quarterly) goal. They might look at it monthly, but there’s no way that it moves monthly. And if it doesn’t move from month to month, irrespective of how hard they try, it creates despondency.
3. Because it’s such a big number, it doesn’t inspire them to act. It wasn’t clear what they needed to do to move this metric in the time period in question.

Hence, the metric had the opposite effect: it induced anxiety and led to despondency.

Pliable metrics: The alternative to leading and lagging metrics

Pliable means you can bend it and shape it. What’s pliable for me might not necessarily be pliable for the person next to me, if they have a different set of skills and experience to me. And if you give me a bit more time, some things might become more pliable. Hence, pliability is based on experience and on time.

Pliable metrics are ones that you can move and shape within a period of time. 

There are three elements to this statement:

1. “You can”: It is within your sphere of influence; you can realistically do something about it.
2. “Move and shape”: It inspires you to take action, and it’s fairly clear what action to take.
3. “Period of time”: By the next time you look at this metric, you will be able to move it.

So, instead of asking whether a metric is leading or lagging, ask this:

Can you take action to move it before the next time we check in?

If yes, then include it in your dashboard. If no, then it might need to live somewhere else.

Beware…

With this in mind, there’s a warning we’d need to give: Be wary of creating activities that don’t lead to results.

Because you’re not obsessed with the result when setting this metric, there’s a possibility that you are creating more activity as opposed to more results.

To counter this, there needs to be a very good understanding of the relationship between metrics. In effect, if you hit the gas, you need to know what it’s going to do to your speed. And the impact that an increase in speed will have on your ability to steer and react to elements on the road. This is a leader’s job and comes with experience and business model understanding.

Closing the example

So, in our NGO example, raising $50m might be a good metric for the executive team to track every six months or year. They can realistically influence it, even though it’s over a longer time period. It inspires them to take action, which is to activate, motivate and empower the in-country teams.

Whether it’s a leading or lagging metric now becomes a moot point.

The in-country teams, however, need a different metric on their dashboard, which could look more like “50 introductory meetings with qualifying donors”, and they could track those every month or even more frequently.

TL;DR

The “leading/lagging” conversation is not an insignificant one – creating the understanding of which influenceable metrics lead to which lagging results is incredibly important.

But don’t stop there. Before you put it on a dashboard, ask the question:  “Can you take action to move this metric before the next time we check in?”

Keep pushing the leading/lagging conversation until you find that metric.

And then put those onto a dashboard to track and monitor, and let them influence your actions and behaviours.